Karen --nice piece and thoughtful.
Square is slick. It is also a company that is in a sector where it is verydifficult to make money (profit money). Square ticket size is low and 'no you cannot make it up on volume'. Small ticket size will kill them. Interchange, as it stands, even with massive modifications is designed to make the Bank owners money (all of MC and VISA were bank owned until they both went public 6 or 8 years ago.
Now 'only MOST of ' VISA and MC is owned by banks).
Interchange is an enormous tax like fee on every transaction, riding to or from, or on a branded part --- (rails) of the transaction chain. So, the brands always get their cut. DISCOVER and American Express own all sides of a transaction so they are not 'in this discussion'.

The 'Unprotected' reality of merchant recourse stature makes any merchant the burden of fraud of most types, and the expense of exception item handling (see returns) and there are US Laws (USPS 30 day return guarantee has been around since the 1800s!!!), example) that make it expensive to ship product without suffering recourse for any reason
. Square sits in the middle sort of exposed to the costs of both sides. I think they are facing enormous risk and costs.
For Square to make money they will have to cut costs dramatically, (PR and most S G& A), in order to eek out a real profit. This will create a that lack of visibility and runs counter to growth.
They should license if.......the are able or change their strategy. They cannot make money at flat rate 2.75% + $ .30 per transaction because Any merchant with higher ticket size will get better service and price - period. (interchange price to them is cost). One of the flaws of most internet based companies is that customer service fits into an algorithm or NADA. ISOs thrive because they represent a bona fide touch. ''Maybe Square is stuck with a unprofitable merchant base, that has no reason to stay". If SaaS apps can tie them, then they could win. But I am not a believe but like the Square for convenience.